See how you can cash in on government co-contributions

See how you can cash in on government co-contributions

See how you can cash in on government co-contributions

Did you know the government may add up to $500 to your super fund, if you’re a low to middle-income earner who has made an after-tax contribution to your super?

If you’d like to know more, we explain how government co-contributions work, how to find out if you’re eligible and what you need to do to receive your co-contribution.

What is a co-contribution?

The Superannuation Co-Contribution Scheme is a government initiative that aims to assist low to middle-income earners save for their retirement.

What this means is depending on the amount of income you earn each year, the government may add to your super balance when you make a voluntary after-tax contribution.

Am I eligible for a co-contribution?

To be eligible for government co-contributions, generally you must:

  • make a personal after-tax contribution to your super fund
  • lodge a tax return
  • have a total income that’s less than $51,813 for the 2017-18 financial year
  • receive 10% or more of this income from eligible employment and/or running a business
  • be under age 71 at the end of the financial year that you’re making the contribution
  • have a super balance less than $1.6 million as at 30 June of the previous financial year
  • not have exceeded the $100,000 annual after-tax super contributions limit
  • not have held a temporary visa at any time during the financial year (unless you are a New Zealand citizen, or it was a prescribed visa).

What do I need to do to get it?

You don’t need to apply for the super co-contribution, but you will need to ensure that you have provided your tax file number to your super fund.

Your super fund cannot accept after-tax contributions, or receive co-contributions on your behalf, if you have not provided your tax file number.

You will also need to lodge an income tax return. The Australian Taxation Office (ATO) will then use the information provided in your tax return and the contribution information from your super fund to work out your eligibility.

If you are eligible, the ATO will automatically calculate the appropriate amount that’s owing to you and will typically deposit this into the super fund which you have made the contribution.

Also, remember if you’re aged 65 or over at the time of making a personal after-tax contribution, you must also satisfy a work test, whereby you must’ve been gainfully employed during the financial year for at least 40 hours over a period of no more than 30 consecutive days.

Meanwhile, if you’ve recently retired and have closed your super account, it may be possible to have your co-contribution paid directly to you.

How much will the co-contribution be?

If your total income is equal to or less than $36,813 and you make personal after-tax contributions of $1,000 to your super fund, you’ll receive the maximum co-contribution of $500.

If your total income is between $36,813 and $51,813, your maximum entitlement will reduce progressively as your income rises.

Your total income includes your assessable income, reportable employer super contributions and any reportable fringe benefits (which typically includes non-cash benefits provided to you by your employer, such as a company car or lease vehicle).

If your income is equal to or greater than the higher income threshold ($51,813), you will not receive any co-contribution.

Also note, the income thresholds mentioned above are indexed each year in line with increases in average weekly earnings and may change in future financial years.

Meanwhile, if you have claimed a tax deduction for a personal super contribution, this contribution will not entitle you to a co-contribution.

Where can I go for help?

When it comes to whether you’re eligible for a co-contribution, working out your exact total income may be a bit tricky depending on your circumstances, so you may want to speak to your adviser.

If you don’t have a financial adviser but would like a bit more information, call us on 03 6343 1007.

To find out about other ways you can add to your super, check out our Super contributions info page.

 

Original Source: Produced by AMP Life Ltd and published on 25 April 2018.  Original article.